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Rogue R&D tax relief advisers need tighter regulation
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HMRC needs to police R&D claims and providers


Jen Badger looks at a new research report on claimants’ experiences claiming R&D tax relief and the implications for HMRC.

11th Jan 2022
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Recent research for HMRC undertaken by Kantar Public, offers some great insights into how and why companies choose to claim R&D tax relief. The study highlights where companies get their information from, and who they trust to give them this information.

Attitudes to R&D Tax relief

Unsurprisingly, the response to the R&D tax relief scheme was wholly positive, with all respondents describing it as a very positive for both themselves and the UK economy as a whole.

When asked how R&D tax relief affected the likelihood of a company undertaking R&D, the answers were mixed, and tended to depend on the size of the relief received. For those companies making sizeable claims, R&D relief tended to be part of their strategic planning and was seen as a way of partly funding this work. Smaller claimants tended to see it as more of a bonus, and did not tend to plan their R&D spending around the claim.

Learning about R&D tax relief

Participants were also quizzed on where they had first heard about R&D tax relief, and where they turned to find out information about it. Happily, most of the companies had been initially informed that they might have a claim by their accountant or tax adviser, based on the accountant’s knowledge of the company’s activities and finances.

More worryingly, however, a small but significant proportion of respondents first heard about the schemes through contact with specialist agents. These contacts tended to be through cold-calls, emails or LinkedIn contacts, and could be very frequent.

This is concerning because the quality and integrity of both the R&D specialists themselves and the information they provide can vary widely. It is possible to find providers offering detailed and highly accurate blogs on how to treat intangible assets all the way to providers asserting that all care homes can claim R&D tax relief – they can’t!.

One participant went as far to describe these latter specialists as “rogue firms” and “a risky game”.

The bad news for HMRC was that the tax authority is the last place claimants find out information about R&D tax relief. Participants in the research said that they only accessed the online information HMRC provides after they had heard about the R&D scheme from other sources. Once a company was aware of the R&D tax relief scheme, it found HMRC’s help better and more reliable than that from specialist advisers.

Choosing an R&D specialist

When it came to choosing whether or not to use an adviser to complete the claim, the decision came down to the internal capabilities of the claimant company. Larger claimants with internal finance teams were more likely to prepare the claim themselves. This decision was also influenced by whether the claimant has successfully claimed R&D tax relief before, and how difficult they perceive the process to be.

Once the decision had been made to use a specialist, claimants spent very little time researching which specialist to use, and most relied on their accountant to help make this decision. Where an accountant offered this service, either themselves or through a team within the same accounting firm, claimants were likely to chose to work with their accountant due to the existing relationship and trust they had with their accountant.

This trust was also evident where accountants recommended specialist firms, with claimants more likely to work with specialists they had been referred to by their accountant, or by others in the sector who had previously claimed.

Once a firm had decided how to claim R&D tax relief, it was interesting to note that the process of claiming was almost identical no matter who the companies worked with to prepare the claim. The only major difference was in how much of the work was done by the claimant company versus the specialist.

Recommendations for HMRC

A major theme running through the report was how much the claimants felt that HMRC should be taking the lead in increasing awareness of the scheme and policing both claims and providers. Several respondents felt that HMRC should be working to both promote the scheme to SMEs and simplify the criteria and language used to make it easier for first-time claimants to claim without using specialist advisers.

In reference to specialist providers, respondents also felt that HMRC could do more to provide training and support. Claimants also wanted information on best practice to enable them to make better decisions about which providers to use, and to recognise rogue specialists more readily.

Replies (8)

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By Hugo Fair
11th Jan 2022 18:46

"The only major difference was in how much of the work was done by the claimant company versus the specialist."

In my direct experience, there is little difference in how much work the claimant company has to do using either route ... a specialist typically provides a standard template (both of procedures and of forms), but all the basic grunt work (the descriptive prose through to the collection & collation of figures) is still done by the claimant company.
The only exception is where the specialist company is probably 'cutting corners' (by relying on a cut'n'paste approach with the least effort to shove the client's figures into 'their' version).

So, it's as well to realise that what you're buying if you appoint a specialist is at best a mentor/guide not a sub-contracted turn-key service ... which is no doubt why so many of them have onerous contracts that tie you into their fees for between 3-5 years (even if you choose to dispense with their services once you've got the hang of it).

Thanks (2)
By petestar1969
12th Jan 2022 09:40

We have one client that makes"R&D claims" without actually doing any R&D.

At the last meeting I had with them the partner told them "you do know you actually need to be doing R&D to make a claim, right?" The client response was well we're making the claim anyway, everyone else does...

I don't work on that client anymore........

Thanks (1)
Replying to petestar1969:
By Justin Bryant
12th Jan 2022 09:55

What else do you expect when HMRC do practically b*gger-all to properly police dodgy R&D claims and everyone knows that, which only encourages this sort of fraudulent behavior.

Thanks (0)
By Duggimon
12th Jan 2022 09:52

Is it just me or is this article about a different topic than the headline?

I think we all agree there are many "specialists" in the business of making spurious claims on behalf of uneducated SMEs, which is what this headline appears to reference, however only the last sentence suggests anything about this.

"Claimants also wanted information on best practice to enable them to make better decisions about which providers to use, and to recognise rogue specialists more readily."

Like what? What is the issue currently and what can be done to improve it? This article is just saying some vague things about opinions on the current process and then saying "we wish it could perhaps be a bit different" with no suggestions or even quantifications of those wishes.

There's a good article could be written on the current issues around R&D claims, where HMRC get it right and where they get it wrong, the issues with "specialist" claim firms and how the process could be improved. None of that is in here though.

I mean it's probably not the author's fault their article isn't the article I thought it was, but if I click on a link saying "HMRC needs to police R&D claims and providers" I expect an article about the need for HMRC to police claims and providers and not a summary of claimants opinions on their own claims.

Thanks (0)
Replying to Duggimon:
By Justin Bryant
12th Jan 2022 09:57

Yes. It's yet another example of bad journalism here (there are lots).

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By Michael Beaver
12th Jan 2022 13:02

I don't know how many of my clients have been called out of the blue being sold the dream of free money because of the 'R&D' they've done. Thankfully my clients are well trained enough to call us first before doing anything tax related. Almost always the conversation ends in 'you can try if you like but you'll also need a new accounting firm, as I don't believe you qualify and any claim you make will be fraudulent'. Never had a client proceed with one of these.

Thanks (0)
Replying to michaelbeaver:
By Hugo Fair
12th Jan 2022 20:20

"Never had a client proceed with one of these."

But of course, by definition, since you've already told them 'you can try if you like but you'll also need a new accounting firm' ... so any that tried are no longer clients of yours. :=)

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By Lawrence82
13th Jan 2022 14:35

We lost one client because we queried what R&D he was doing creating his website. Despite our remonstrations, the firm doing the claim seemed happy to submit it and take their cut. I wonder why /s They will probably disappear within a few years.

We recently took on another client with a huge claim last year that doesn't reflect the costs in the accounts and is touch and go whether it's R&D anyway.

I imagine there are millions of pounds worth of this sort of thing up and down the country.

Thanks (0)